Aug 24, 2022 Matthew Hung

New Reporting Requirement For Not-For-Profits

About 69% of not-for-profits in Australia are self-assessed income tax exempt bodies such as sporting clubs. The rest are either endorsed tax concession charities (ACNC registered/endorsed by the ATO) (27%) or taxable not-for-profits (4%).

Currently, self-assessed income tax exempt bodies are not required to notify their eligibility to self-assess income tax exemption.  However, from 1 July 2023, non-charitable not-for-profits with active ABNs will be required to lodge an annual self-review to access income tax exemption. The intent is to enhance trust and confidence in the not-for-profit sector, and increase the understanding that not-for-profits must self-assess as income tax exempt, while also supporting a level playing field with similar regulatory requirements expected of charitable not-for-profits.

The self-review return will be an online form comprising similar questions to the existing self-assessment worksheet available on the ATO’s website. This means not-for-profits will submit information ordinarily used to self-assess eligibility with the ATO. After the first annual self-review return is submitted, it is anticipated that not-for-profits will confirm or amend information provided to them on a pre-filled self-review return each year.

The ATO is still in the process of developing the form, currently collaborating with the not-for-profit sector to co-design, consult, and test the return. The first lodgement will be due after 30 June 2024.

Getting ready – What non-charitable not-for-profits (NFP) can do to prepare:

• Update contact details with the ATO:
  • Through the ABR website abr.gov.au
  • Call the ATO NFP Premium Advice Service on 1300 130 248 (Option1)

Review Eligibility for income tax exemption

• Determine if the NFP has a charitable purpose and could potentially be registered as a charity with the ACNC. The ACNC website acnc.gov.au has a list of charitable purposes that can be used to determine if a NFP has a charitable purpose
• Check that self-assessment criteria is being met:
  • Specific criteria for one of the eight self-assessment categories (community service organisations, cultural organisations, education organisations, health organisations, employment organisations, resource development organisations, scientific organisations or sporting organisations)
  • The special conditions, which generally requires it to operate in Australia, follow its governing rules, and use its income and assets for its purpose

The RDL not-for-profit team can guide your organisation through this process.  We are just a phone call or email away.